Tuesday, July 24, 2012

The
FCC is seeking
public comment on TracFone's petition
requesting that the FCC adopt a three-year Lifeline document retention
requirement. The requirement would be added to the FCC's "full
certification" mandate for ensuring low-income consumer eligibility for voice
services through Lifeline. Concerns have been raised that full certification
would be an ineffective check on fraud, waste, or abuse absent retention of
records for inspection.

But
a deeper set of concerns already surrounds full certification. The FCC's
mandate may do more to keep many otherwise eligible low-income consumers from
receiving Lifeline service than it does to combat misuse and abuse.
Implementing a record retention requirement, however necessary to administer
full certification, would simply add compliance costs to the already
problematic full certification mandate.

This
overlooked aspect to implementing full certification raised by TracFone
provides yet another reason for the FCC to rethink its approach. The FCC should
rescind full certification in favor of a simpler approach that better ensures
low-income consumers most in need obtain and retain service. Or at least the
agency should opt for postponement until full certification can be better
implemented using a nationwide database.

In
its February 2012 Lifeline
Report & Order, the FCC
adopted full certification as a measure to cut fraud, waste, and abuse in the
Lifeline program. This essentially involves eligible telecommunications
carriers (ETCs) corroborating a Lifeline subscriber's enrollment in other
public assistance programs in order to qualify for Lifeline service. The FCC's Report &Order adopted a requirement that ETCs enrolling low-income consumers
in the Lifeline program for voice services must access available state or
federal social services databases to verify eligibility. Otherwise, ETCs must
review would-be subscribers' documentation to verify their eligibility.

In
blogposts
from earlier this year, FSF President Randolph May and I explained why a full
certification mandate for Lifeline eligibility will more likely result in
otherwise eligible persons not signing up for service than in cutting waste,
fraud, or abuse.

To
briefly restate that case: Many states do not have accessible databases or
workable arrangements in place with carriers to conduct such verification. In May
and June,
the FCC granted several temporary waivers from its full certification mandate
on account of the incapability of many states and ETCs to comply with the
agency's mandate. And many low-income consumers do not possess the
documentation or means of transmitting such documentation to ETCs in order to
enroll in Lifeline. In states that have previously taken a full certification
approach to Lifeline there is evidence that low-income consumers who are
intended beneficiaries of the Lifeline program never complete the process. This
has meant denial of enrollment or halted service even where consumers have
disclosed their name, address, date of birth, and part of their social security
number.

Full
certification will likely have the unintended consequence of keeping otherwise
eligible low-income consumers from subscribing to Lifeline. The harm would be felt
most by those who should be the focus of any universal service program. To this
extent, full certification works at cross-purposes with what should be the
future course for USF.

Lifeline
should be the model for the future of the USF program. By targeting subsidies
directly to those in financial need, Lifeline offers a more efficient approach
to ensuring universal service than other, indirect subsidies. This targeted
approach should eventually replace the billions of dollars in the high-cost
fund and other USF subsidies now distributed to carriers. After all, there is
little accountability or way of ensuring that those indirect USF subsidies to
carriers are actually keeping the price of voice services down.

And
those USF subsidies hit consumers hard. USF subsidies are funded by so-called
surcharges – functionally the same thing as taxes – that voice subscribers pay
as a part of their monthly bills. The current USF surcharge or "tax"
rate that consumers are now assessed on the long-distance portion of their
monthly bills is 15.7%.
Reforms for cutting fraud, waste, and abuse in the Lifeline program are
important. But implementation of the FCC's November 2011 USF Reform Order and forthcoming USF contribution
reforms should be the agency's priority when it comes to cutting universal
service costs and spelling relief for taxpayers.

In
its May 30 petition, TracFone points out why mandating eligible
telecommunications carriers (ETCs) to provide full certification without retaining
documents necessary to ascertain consumer eligibility makes little sense.
Absent document retention, a Lifeline full certification mandate amounts to an
honor system approach as to whether ETCs check consumer documentation to verify
eligibility. With only ETCs’ say-so to go on, the Universal Service
Administrative Company (USAC) would be unable to conduct inspections to ensure
that ETCs are actually complying with full certification.

From
an administrative standpoint, postponing full certification until a document
retention requirement is added would better ensure that full certification
serves its intended purpose. But there is a downside. ETCs would face
additional costs in retaining such documentation, ensuring that consumer
privacy is maintained, and making such documentation accessible for subsequent
inspection. Those additional costs may be necessary for a functioning full
certification process. But they add to the cumulative case against a full
certification mandate for Lifeline service eligibility.

The
FCC also has before it an April petition for reconsideration
of its full certification mandate. The agency should rescind that mandate.
Instead, the FCC can simply require that ETCs establish the Lifeline eligibility
of low-income consumers by checking name, address, date of birth, and the last
four digits of the social security number. At the very least the FCC can
postpone full certification until a national database can be established to
allow for a more efficient and streamlined method for verifying Lifeline
eligibility.